Broker News

Report calls for one industry Ombudsman

The Government has released the interim report of the review into the financial system external dispute resolution (EDR) and complaints framework chaired by Professor Ian Ramsay.

One of the key recommendations is a single industry ombudsman scheme for financial, credit and investment disputes (other than superannuation disputes), which would replace the existing two EDR schemes – the Financial Ombudsman Service (FOS), Credit and Investments Ombudsman (CIO).

The report outlines several perceived benefits of this recommendation, such as improved:

Efficiency: removes jurisdictional overlap, with all financial product disputes (apart from superannuation matters) being considered by a single body.

Complexity: consumer confusion and complexity as all financial product disputes (apart from superannuation disputes) will be dealt with by one body.

Comparability of outcomes: due to greater consistency in processes and procedures.

Regulatory costs: duplicated costs for members to the extent a single scheme realises efficiencies (by removing need for two boards, two terms of reference, etc).

“Having considered the impacts of competitive tension within the current framework, the Panel is not convinced that competition between EDR schemes is appropriate and is not persuaded that maintaining the status quo, of multiple schemes with overlapping jurisdictions, provides superior outcomes for users compared with a single scheme,” the report states.

However, the MFAA and the FBAA have opposing views on whether this would be a positive development for the broking industry.

The FBAA supports merging the CIO and FOS into a single Ombudsman, however, warns it must be appropriately staffed and budgeted to deal with the increased number of cases.

“It is economically sensible to combine both financial schemes but at the same time, we do not want to see a negative monopolisation to the market which impacts everyone involved,” says FBAA executive director, Peter White.

“One Ombudsman is better from a consumer and user perspective provided they have the necessary resources to ensure the issues are dealt with quickly and efficiently, which is not the case at the moment.”

He believes brokers will benefit from having a single Ombudsman that is able to deliver swift outcomes to disputes.

The MFAA, on the other hand, said in a statement that a single scheme may be beneficial for the largest financial service providers, but would be a negative outcome for small businesses and financial services providers, including mortgage brokers.

“We find in our work that the CIO performs a relevant EDR service focusing on smaller financial services providers, since it deals with our providers every day,” says MFAA chair, Cynthia Grisbrook.

“As a broker myself, I have no confidence that a mega scheme would serve the needs of consumers and small businesses seeking mediation on issues as they arise.”

Grisbrook describes the proposed scheme as a “bull in a china shop for smaller providers”.

“Adverse findings from a mega scheme could end a broker's business, and we don’t believe such a scheme would have the expertise to deal with disputes appropriately.

“Forcing our members to join a massive, slow, bureaucracy – would mean they would have to contribute to a scheme that would do little to help them resolve disputes.

“Furthermore, it would necessarily be focused on the needs and mediation practices of the larger financial service providers, since they generate the most complaints and would pay the bulk of the new scheme's fees.”

The MFAA is calling for an effective set of policy recommendations around dispute resolution.

“Not simply the creation of a new massive complaints bureaucracy,” Grisbrook concludes.